The sell-off in US technology stocks could take time to reverse as data centre restrictions threaten the growth of the artificial intelligence (AI) trade, according to Arvind Sanger, Managing Partner at Geosphere Capital Management.
Sanger said the election outcome in Texas, a key market for data centre investments, could delay fresh project approvals. Since AI expansion depends on access to large amounts of power, this could slow the sector’s growth.
Wall Street indices fell sharply on Thursday, November 5, wiping out all the gains made since the midterm election rally as investors sold across sectors, from traditional industries to data centres and AI-linked companies. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all recorded their worst single-day declines since April 2025.
Sanger said the fall in US stocks could have been intensified by some funds winding up their equities businesses and possible losses at multi-strategy funds, Sanger said.
“I do believe that this was exacerbated by a few funds blowing up. So we had a couple of funds announce that they were winding up the equities business, and I suspect some of the books at some of the multi-strats might be blowing up,” he said, referring to the previous night’s sell-off.
Sanger also expects Anthropic’s planned initial public offering (IPO) to be delayed unless markets recover quickly. He does not see a V-shaped recovery and said a prolonged sell-off could raise wider contagion risks.
“But if this stretches out over months and some of these people with high interest debt start to get into trouble, then that is a risk,” he said.
India, however, could benefit if the AI trade loses some of its dominance and crude oil prices remain low. Sanger said India’s economy is less dependent on AI and has a broader market, while earnings growth has improved over the past few quarters. Lower oil prices and easing tensions in West Asia could further support India’s growth through the rest of the year and into 2027.
This is an edited transcript of the interview.
Question
I think the question everyone is asking now is: Is this perhaps the start of a broader correction in the US markets or in the tech rally, or can we still characterise this as letting the air out of the overstretched artificial intelligence (AI) rally?
Answer:
You can never tell until after the fact whether this is the end of the AI rally, but it certainly has sprung a serious leak. I would say that the single biggest election shock this week was the loss of the Republican Governor Abbott in Texas. If you look at Texas, they have 90 gigawatts of installed capacity and about 470 gigawatts of planned capacity addition. That is the linchpin of where AI data centers are being built. There are other states, obviously, but this was the most important one. The lady who has won the election is not opposed to data centers, but has put all kinds of conditions, which means that anything new might have to wait. There are some projects in the pipeline that will go ahead, but any major new approvals might not happen until September next year. The problem for the AI trade is that without power, the AI sector cannot really perform. For that power, we need some of the major states and local communities to continue approving these projects. Clearly, this has taken a major correction. I would argue that it has overcorrected, but the reality is that there has been a big sell-off in the short term. I don’t see this as a V-shaped recovery because it is going to take a while for these things to get back on track.
Question
The incoming Texas governor has indicated a willingness to work as long as the projects benefit Texans as well. So perhaps it is not going to be as easy as before, with more checks, balances and guardrails. Given the market conditions, could the Anthropic IPO get delayed or pushed out?
Answer:
There is no way that, in this environment, an Anthropic IPO can go ahead as planned. It was supposed to come in the week before Thanksgiving. Unless the market manages a miraculous recovery in the next 10 days, I think it is extremely likely that the Anthropic IPO will get pushed back. Whether that gets pushed back to December or they do a private offering and then push it into next year is something we will have to see, depending on how quickly the market recovers from here. I think that is a very important bellwether. Part of the market sell-off was driven by concerns that anything like an Anthropic IPO is also unlikely to be possible at this time.
Question
SoftBank, which is a big investor in OpenAI, is down sharply in Japan. It is all interconnected, and SoftBank is also a large holder of Indian equities. Are we at a point where we need to start thinking about those kinds of contagion risks? Markets move very fast and try to spot weakness.
Answer:
I’m not sure that contagion is about to break out and we will have all kinds of dominoes falling. I don’t see that as yet. If this continues and things stretch out for a long period, then there could be risks. Remember, OpenAI just raised $20 billion a week or 10 days ago. It was less than what they had hoped for, but they have raised money recently, so nobody has the wolf at the door. But the question is: Who are the weak hands? Who are the ones with high debt? Oracle is one that has high CDS spreads and very high interest rates. Are some of these companies going to get into trouble if their projects get delayed more and more? That’s the big risk. Not so quickly, but if this stretches out over months and some of these people with high-interest debt start to get into trouble, then that is a risk. I think it is too early to start worrying about it. As you mentioned about the new Texas governor, at the end of the day, AI creates construction jobs, installation jobs and tax revenues for local communities, but it has gotten extremely unpopular. So, I think the hyperscalers and others need to go back to the drawing board. It is a little bit like the old saying of Nixon in China: it might be easier to get buy-in from local communities if you’re sitting across from a Democrat and getting it done. I’m not ready to say that this is going to cause a major meltdown. But if that optimistic vision doesn’t come to pass, then sometime in the next three to six months, we have to worry about contagion taking hold.
Question
India’s markets have just started to get back on their feet after a long time. Can India be seen as anti-AI? If AI is deflating fast, can capital come to India as a bit of a shelter?
Answer:
I think absolutely, but not because it is anti-AI. India, as an economy, is not AI-dependent or AI-driven, and it has a broader market. Earnings growth has also started to look better over the last couple of quarters. And it is anti-oil, right? That’s the other big one that India was suffering from. To the extent that this war has reduced the manoeuvring room for Trump to go much more aggressively on the war, and if the goal now starts shifting towards cooling the conflict and West Asia peace starts to emerge, then I think India is really off to the races. You get domestic growth, you get the oil headwind away, and you get the AI trade not being the only game in town. Then India really could be, in my opinion, off to a great start for the rest of this year and for 2027.
Question
If I were to ask you, based on your experience, what does your gut say? Are we entering a phase of risk-off that will last for a meaningful period, or do you think this will get resolved quickly?
Answer:
There is no V-shaped recovery. It’s not like last April, when Trump announced the tariffs on Liberation Day and then backed down a couple of weeks later, and the market had a quick rebound. I do believe that this was exacerbated by a few funds blowing up. We had a couple of funds announce that they were winding up their equities business, and I suspect some of the books at some of the multi-strats might be blowing up. Things nowadays happen so quickly with some of these concentrated bets across multiple funds. This could last for a few more days, but beyond that, it will depend on how quickly we get signals from the Democrats, and particularly some of the governors. Congress is less important because these are local community and state decisions. How quickly some of these Democratic governors start to talk about the other side will matter. I don’t see them in any rush to bail out the AI industry by coming to the rescue. Unlike Trump, who is very attuned to the market, I’m not sure how attuned the Democrats are. So, in that sense, I don’t see a V-shaped recovery. If it were up to Trump, with this magnitude of market correction, he would be trying to do something. But now it is not in his hands.
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India could benefit as AI trade cools and oil headwinds ease: Arvind Sanger
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